Cooperation Is Key for Managing E-Discovery in 2010

Key Findings

• Cases in 2009 demonstrated that companies without clear, consistent and repeatable processes for the identification, preservation and collection of electronic documents, will be the subject of judicial sanctions (see Note 1).
• Discovery costs can be lowered substantially with the application of technology, especially archiving, legal hold and collection software.
• Effective litigation preparedness and response requires a strong working partnership between legal and IT.

Recommendations

• Do not continue to rely on custodian-led collection unsupported by technology, undocumented and not supervised by counsel.
• Ensure that defensible collection procedures are in place and that an expert supervises them and can defend them, if need be, in front of the judge.
• Always include IT in the necessary step of suspending routine deletion of business records when litigation is reasonably anticipated.

Clients should refer to the Electronic Discovery Reference Model (EDRM) to understand the process of e-discovery and to target technology to assist in its steps. E-discovery is the production and presentation of electronically stored information (ESI) that meets the basic requirements of discovery. In our analysis of the market for products and services related to e-discovery, Gartner has used the EDRM (www.edrm.net), and will continue to do so.

The model is not perfect and its lack of specificity has led to the creation of categories that lie outside its definitions. The most important of these is "early case assessment" which Gartner has defined in "Early Case Assessment: E-Discovery Beyond Judges and Regulators Is About Risks, Costs and Choices."

See Note 2 for a basic definition of discovery.

Audience

The audience for e-discovery issues includes the following IT and non-IT roles:

• CIO
• Application manager
• Security and compliance officer
• Data center manager
• E-mail system manager
• Litigation support personnel
• In-house counsel
• HR managers
• Compliance (non-IT) personnel
• Records managers

Through 2012, companies without an information governance strategy and technology for content archiving solutions, will spend a third more on e-discovery than those with content archiving solutions. By year end 2011, 25% of all companies will have specified a litigation hold process and purchased software to assist in the identification, preservation, collection and processing of electronically-stored information.

During 2003 and 2004, Judge Shira Scheindlin wrote a series of opinions, usually referred to as the Zubulake decisions, which spoke of the following issues:

• The scope of a party's duty to preserve electronic evidence.
• A lawyer's duty to monitor their clients' compliance with data preservation.
• Data sampling.
• The ability of the disclosing party to shift costs to the requesting party.
• The imposition of sanctions for the destruction (spoliation) of electronic evidence.

(See Note 3).

In early 2010, Judge Scheindlin again addressed the subject, in Pension Committee of the University of Montreal Pension Plan, et.al. v. Banc of America Securities, LLC, et.al Amended, Order, Case No. 05-cv-9016 (SDNY Jan. 15, 2010).

Courts cannot and do not expect that any party can meet a standard of perfection. Nonetheless the courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated and that such records are collected, reviewed and produced to the opposing party. As discussed six years ago, in the Zubulake opinions, when this does not happen, the integrity of the judicial process is harmed and the courts are required to fashion a remedy. Once again, I have been compelled to closely review the discovery efforts of parties in a litigation, and once again, have found those efforts are flawed. As famously noted 'those that cannot remember the past are condemned to repeat it'. By now, it should be abundantly clear that the duty to preserve means what it says and that a failure to preserve records – paper or electronic – and to search in the right places for those records will inevitably result in the spoliation of evidence.

Judge Scheindlin noted that no one on either side was purposefully destroying evidence, but that litigants were conducting discovery in an "ignorant and indifferent fashion." There were five points in the opinion that will impact the partnership between legal and IT in preserving and collecting electronic evidence:

• The failure to issue a written litigation hold.
• Failure to identify key players and preserve and collect their documents.
• Failure to cease the deletion of e-mail or other routine destruction of business records.
• Failure to collect records of former and current employees that are in a party's possession.
• Failure to preserve backup tapes when they are the sole source of relevant information or relate to key players.

Gartner is not qualified to give legal advice and the previous details should not be read as such. Our aim is to advise IT experts on how to assist their legal colleagues best in the identification, preservation and collection of electronic material. Only lawyers can say who or what is involved, but similarly, only IT or individual custodians under the guidance of IT and legal can ensure that electronic data is reliably preserved.

It is imperative that clients act on this advice this year, as the expectation is that the number of lawsuits will go up, even in industries that are not highly litigious, due to economic conditions and the aftermath of the recession (see Note 4).

In 2010, every indication is that judges will become more adamant in enforcing the need for cooperation. To be able to cooperate, attorneys from both sides must at least know what information may be subject to discovery. As evidence of this, we cite The Sedona Conference "Cooperation Proclamation," which has been endorsed by more than 100 members of the judiciary and cited in more than a dozen opinions (http://www.thesedonaconference.org/content/tsc_cooperation_proclamation/endorsements.pdf).

In late 2009, the Seventh Circuit Court of Appeals launched an Electronic Discovery Pilot Program to test a set of principles designed to minimize the growing cost and burden associated with electronic discovery (http://www.ilcd.uscourts.gov/Statement%20-%20Phase%20One.pdf).

The pilot takes the form of supplemental procedural guidelines addressing e-discovery issues, comprising a task force of trial judges, attorneys, academics and litigation consultants with expertise in e-discovery. The pilot runs until 1 May 2010. At the heart of these guidelines is to "incentivize early and informal information exchange on commonly encountered issues" relating to ESI discovery and the encouragement of both parties to discuss and resolve issues early and without court involvement.

IT's role in cooperation is clear: if attorneys must attend their pre-trial conferences with the names and details of possible custodians and the description and location of potentially discoverable documents, it is IT that will be asked to provide this. Some of the relevant text is contained in Note 5.

In the following sections, we give advice on how better management of electronic information will help to fulfill the need to cooperate and also the need to do a better job in preserving and producing electronic information.

Information governance is the way to mitigate e-discovery problems. Getting on top of the vast, existing pile of ESI and changing work practices to create less of it will take years. During the past five years, several markets and technology types have benefited from an e-discovery-driven need for better information management. Most prominent among these is e-mail active archiving.

The market is fast growing and we predict it will continue to grow at a rate of 21.2%, reaching 1.23 billion by 2013. E-mail is one of the most frequently requested data types in discovery and any company that needs to carry out e-discovery will usually find that e-mail is involved. Clients frequently report that archiving systems with even simple discovery features (hold, search, export) built in, save them time and effort in their discovery exercise. They also allow legal "hold" to be more easily carried out on the data in the archive, as well as facilitating cooperation among the parties.

Archiving allows IT to enforce rules about .pst files, which can often be problematic in discovery. Archiving vendors also allow "other" types of data to be managed in their repositories. Archiving is targeted at office files (Word, PowerPoint and Excel) and can be considered to be a halfway house between e-mail-only archives and records management. Gartner recommends that clients use existing archiving systems to capture business continuity information, but not formal record keeping. Most archiving vendors do not have a way to carry out ad hoc e-discovery tasks (identification, preservation and collection). This will change rapidly over the course of the next two to three years, a fact which is reflected in a change in the way we will cover this market.

Records management systems are designed for longer term read-only access to vital business records. Keep in mind that most of what is produced electronically – also true when paper was used for business communications – is not going to be a "record".

The practice of saving data either because no one is interested in the detailed exercise of culling it, or because "it might be needed one day," is the root of many e-discovery problems. We are not recommending wholesale deletion of information, or getting rid of data because it may cause an e-discovery problem. What we are recommending is a thorough, legally defensible and business-driven strategy for identifying records. That effort should include retention schedules that allow non-essential data to be routinely disposed of as it is no longer of business value or needed to meet legal or regulatory obligations.

Good information management, long term, will require that we all rethink and reformulate our work practices for all documents and data. Since this involves behavioral change, expect it to take a minimum of 12 to 36 months for any major process re-engineering task.

The identification phase of e-discovery involves deciding who to target and what to do regarding a specific request, which may or may not become a "case." If a company is routinely involved in litigation, IT should have an overview of all systems and user logins. E-mail systems, e-mail archiving systems, networked storage devices, including file shares, document management systems, storage, backup and archiving media, are all important in e-discovery. IT should be able to provide file type information to the legal department, which will include an opinion of how accessible certain types of data are, given the stipulation that ESI must be reasonably accessible.

This is a phase of e-discovery around which there is confusion. Some talk about a "data map," which implies a level of detail that is not necessary until and unless those systems become subject to actual discovery requests. Proactive efforts to document the IT estate and a reasonable idea of who uses what systems – IT is provisioning these and so should have active login and password information – is simply good practice. Individual desktops are also important, particularly if they belong to named custodians and the data held on them is not stored elsewhere. What isn't necessary is a detailed index of all the data currently held. Clients may wish to do this as a part of another type of project, but it is not necessary for e-discovery. IT and legal departments should refer to the part of Rule 26 that stipulates what is required to carry out their duties – Federal Rules of Civil Procedure: Rule 26(a)(1)(A)(B) and Rule 26(b)(2)(A)(B)(C). Read the rule and discuss what it means for your company's IT operations.

Do not wait until you are asked by the legal department to identify data sources. Knowing how much data is being generated by users and applications and its relative age and format, can also be applied when undertaking other assignments, like estimating storage costs. When legal generates a request for "custodian, date range and keywords," IT can respond faster to the requests for litigation holds, cost estimates and so forth. If you have this material when required, your legal team can respond quickly and effectively.

The duty to preserve becomes operative, either upon a request from a third party or when a request is reasonably anticipated. Preservation involves identifying custodians and systems on which they may have created or held data, suspending routine deletion of that data and deciding how data will be preserved. As cited previously in this research and reinforced by Judge Scheindlin's recent decisions, issuing a written litigation hold notice to relevant custodians, including IT, specifying what must be preserved in terms of "who, what and when" and having a record of both the original notice and any subsequent additions and/or reminders is what is expected. This includes backup media if IT and legal believe that the data is not available elsewhere. Companies have created problems for themselves by not over-writing backup tapes or putting them into a tape rotation program. Backup is backup: a way to recreate data should a disaster occur.

Archiving and records management are separate from backup. Gartner's infrastructure and operations team have written extensively on best practices for backup and disaster recovery. Following best practice guidelines from a third party, such as Gartner, will help to make whatever strategy you choose more defensible.

The most important points to remember in 2010 are:

• Cooperation at the discovery stage between parties is vital.
• An "indifferent and ignorant attitude" toward discovery will not be tolerated.
• IT's partnership with the legal team can avert the two crucial mistakes of non-cooperation and indifference to e-discovery.